Snapshot - Economics
What casino revenues can tell us about Chinese economic growth
Macau is the only place in China where casino gambling is legal. The spending data, therefore, offers an alternative view of moves in the Chinese economy.
18 December 2018
China and other Asian economies have been under pressure recently from trade tensions and softer technology demand. The slowdown in China is reflected by weaker Macau casino receipts, as shown in the chart below.
Macau casino revenues are considered to be a good indicator of consumer income and activity. Macau is the only place in China where casino gambling is legal. The casinos report their revenues on a monthly basis and the data is perceived as reliable. Since the official GDP data from China is viewed with a degree of scepticism, casino receipts can be better at capturing changes in the business cycle.
However, the recent slowdown in casino revenues hasn’t shifted immediate growth forecasts. The Schroders Economics Team had already lowered its 2019 growth expectations for China in August. Emerging Markets Economist Craig Botham explains that this was “to incorporate a full-scale escalation of the US-China trade war.”
He adds “We have, however, altered our expectations around the currency; we now expect a larger depreciation of the renminbi versus the dollar, even in an environment of broader dollar weakness. Combined with expectations on oil and food prices, this leads us to revise our inflation expectations higher for 2019, to 2.6% from 2.4% previously.”
The team forecasts Chinese economic growth at 6.6% for 2018, slowing to 6.2% in 2019 and 6.0% in 2020. Global GDP growth is forecast to slow to 2.9% in 2019 and 2.5% in 2020. This compares to an expectation for 2018 growth to be 3.3%.
For more on the economic picture for 2019, please see Outlook 2019: Global economy
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.